UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-11968
COSMO COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 59-2268005
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 Ferrier Street Markham Ontario,Canada
(Address of principal executive offices)
Registrant's telephone number including area code: (905) 940-0560
Former name, former address, and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) and has been subject to such filing requirements for the past
90 days.
Yes No ___X____
29,104,066 shares of the issuer's Common Stock were outstanding as of
the latest practicable date September 30, 2002
INDEX
Registrant's representations.....................................
............................ 3
Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets
September 30, 2002 and March 31, 2002.............................
................. 4-5
Condensed Consolidated Statements of Operations
For the three months ended September 30, 2002, and 2001...........
............ 6
Condensed Consolidated Statements of Operations
For the six months ended September 30, 2002 and 2001..............
............. .8
Notes to Condensed Consolidated Financial
Statements........................................................
........................ .9
Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................
......................10-12
Signature.........................................................
..............................13
..
PART 1 - FINANCIAL INFORMATION
Item I. Financial Statements
The registrant represents that the Condensed Consolidated Financial
Statements furnished herein have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent
with prior years and that such Condensed Consolidated Financial
Statements reflect, in the opinion of the management of the Company,
all adjustments (which include only of normal recurring adjustments)
necessary to present fairly the consolidated financial position of
Cosmo Communications Corporation and its subsidiaries (the "Company"),
as of September 30, 2002 and the results of its operation and its
cash flows for the six months then ended.
COSMO COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September March
30, 2002 31, 2002
$ $
(in '000s) (in '000s)
CURRENT ASSETS
Cash and cash equivalents 485 295
Accounts receivable, net of allowance for doubtful
3,960 1,327
accounts of $36,000 and $34,000 in September and March
respectively
Inventories 1,774 1,485
Other assets (note 4) 71 7
Total current assets 6,290 3,114
_________ ________
PROPERTY AND EQUIPMENT, net 13 13
DEFERRED CHARGES 30 34
___________ __________
TOTAL 6,333 3,161
_________ _________
See notes to condensed consolidated financial statements
COSMO COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September March
30, 2002_ 31, 2002
$ $
(in 000's) (in 000's)
CURRENT LIABILITIES
Bank overdraft 164
Accounts payable and accrued expenses
2,058 1,116
Accounts payable to related party(note 5)
3,246 1,314
Loan from related party(note 5) 1,348 1,353
________ ________
Total current liabilities 6,652 3,947
STOCKHOLDERS' EQUITY
Common Stock (note 6 & 7) 1,571 1,571
Treasury stock (note 6) (116) (116)
Additional paid-in capital 26,273 26,273
Accumulated deficit (26,502) (26,814)
Accumulated other comprehensive loss (1,545) (1,700)
_________ ________
Total stockholders' deficiency (319) (786)
TOTAL 6,333 3,161
_________ ________
See notes to condensed consolidated financial statements
COSMO COMMUNCIATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002
September 30 September 30
2002 2001
(In 000's) (In 000's)
Sales $ 2,945 $ 3,660
Cost of Sales 2,574 3,106
Gross Margin 371 554
Commission income 204 170
Total operating income 575 724
Operating expenses:
Selling Expenses 126 210
General and Administrative 314 251
Amortization 2 -
Total operating expenses 442 461
Income from operation 133 263
Other income (expense):
Interest expenses ( 21) (39)
Other income 2 -
Exchange gain (losses) 6 -
NET INCOME (LOSS) 120 224
INCOME PER SHARE 0.004 0.01
OUTSTANDING (AVERAGE) 29,104 15,924
See notes to condensed consolidated financial statements
COSMO COMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2002
September 30 September 30
2002 2001
In 000's In 000's
Sales 5,403 5,612
Cost of sales 4,580 4,699
Gross margin 823 913
Commission income 332 358
Total operating income 1,155 1,271
Operating expenses:
Selling expenses 242 265
General and administrative 574 565
Amortization 3 -
Total operating expenses 819 830
Income (loss) from operations 336 441
OTHER INCOME/(EXPENSE)
Other income 9 -
Interest expenses (48) (84)
Exchange gain (loss) 15 -
Total other income, net (24) (84)
Net income/(loss) $312 357
INCOME PER SHARE 0.0107 0.0382
OUTSTANDING (AVERAGE) 29,104 15,924
See notes to condensed consolidated financial statements
COSMO COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2002
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES: (in 000's) (in 000's)
Net income $ 312 $ 358
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation & amortization 4 -
(Increase) Decrease in accounts receivable, net
(2,633) (1,301)
(Increase) Decrease in inventories (289) 40
(Increase) Decrease in others (64) -
Increase (Decrease) in accounts payable, other
current liabilities 942 (400)
Increase (Decrease) in bank overdraft (164) -
Translation Adjustments 155 46
Net cash provided (used) by operating activities
(1,737) (1,257)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property & equipment - (1)
Net cash used by investing activities - (1)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in credit facilities and long-term
- (2,193)
debt repayments
Net increase (decrease) in due to stockholder - (1,181)
Net proceeds from shares subscription - 2,181
Net increase (decrease) in loan due relatedy party
(5) 1,268
Net increase (decrease) in due to related party
1,932 1,321
Net cash provided (used) by financing activities
1,927 1,396
Increase (Decrease) in cash and cash equivalents
190 138
Cash and cash equivalents at the beginning of the
295 153
period
Cash and cash equivalents at the end of the period
$ 485 $ 291
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for interest
$ 24 $ 104
See notes to condensed consolidated financial statements
COSMO COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND 2001
1. SIGNIFICANT ACCOUNTING POLICIES:
The accounting policies followed by quarterly financial reporting are
the same as
those disclosed in Note 1 of the Notes to the Consolidated Financial
Statements
included in the Company's report on Form 10K for the fiscal period
ended March 31, 2002.
2. INVENTORIES:
Inventories are stated at the lower of cost (first in, first-out) or
market.
Inventory at September 30, 2002 and March 31, 2002 consisted primarily
of finished goods.
3. INCOME /(LOSS) PER SHARE:
Income (loss) per common share is computed based upon the weighted
average number of
common shares and dilutive common equivalent shares outstanding for
each period.
4. OTHER ASSETS
Other assets consist of deposits paid on leases and to sub-contractors.
5. RELATED PARTY TRANSACTIONS
The Company, through its subsidiaries purchased goods from an affiliate
of the principal
stockholder for resale. Transactions are stated in US currency and are
priced at cost.
Balance due is payable based on a trade term of 90 days. There had been
no interest
accrued on the balance as of September 30, 2002.
Affiliate of the principal stockholder also provides a loan to the Company
at an interest
rate of prime plus 1%. The loan is payable on demand. Interest rate
accrued on the loan
was $137,000 as of September 30, 2002.
6. COMMON STOCK AND TREASURY STOCK
(a) Authorized
30,000 Preferred stock, cumulative, convertible at $0.01 par value
9,970,000 Preferred stock, at $0.01 par value
50,000,000 common stock at $0.05 par value
On June 19, 2001, shareholders of the Company at a Special Meeting,
approved the amendment
of the Company's Articles of Incorporation to increase the number of
authorized shares
from 4 million to 50 million shares.
(b) Issued $ ('000)
29,104,000 common stock 1,571
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following is management's discussion and analysis of certain
significant factors,
which have affected the Company's financial condition, and results of
operation during
the period included in the accompanying condensed consolidated financial
statements.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK
This quarterly report may contain forward-looking statements within the
meaning of
Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements are
based largely on the Company's expectations and are subject to a number of
risks could differ
materially from these forward-looking statements as a result of such risks
and uncertainties,
including, among others, general economic conditions, governmental regulation
and competitive
factors, and, more specially, interest rate levels availability of financing,
consumer
confidence and preferences, the effectiveness of the Company's competitors,
and costs of
materials and labor. In light of these risks and uncertainties, there can be
no assurance
that the forward-looking information contained in this quarterly report will
in fact transpire.
LIQUIDITY AND CAPITAL RESOURCES
Working capital has a surplus of approximately $798,000 at September 30, 2002,
an increase of approximately $1,631,000 from March 31, 2002. The ratio of
current assets to current liabilities at September 30, 2002 was 1.15 to 1,
as compared to .79 to 1 March 31, 2002.
The Company has met its working capital requirements for the six months ended
September 30, 2002 primarily from funds provided from related party.
As of September 30, 2002, the new management has provided loans and working
capital credits to a total of $4,594,000. Management believes that the
continued commitment by the Company's current principal stockholder to
provide additional financing at its discretion, the Company
will be able to meet its working capital requirements during 2002.
FINANCIAL AND MANAGEMENT PLANS
The company's stockholders' equity at September 30, 2002 and March 31, 2002
was a deficit of ($319,000) and ($786,000), respectively. Management has
not planned any significant changes in the operation of the Company, nor
any plans to expand product lines, market shares currently.
RESULTS OF OPERATIONS
SALES
Sales in this quarter of 2002 decreased by $715,000 or 20% compared to the
corresponding period in 2001. Sales for the six months ended September 30,
2002 decreased by approximately $209,000 or 4% as compared to the corresponding
period in 2001. The decrease was in line with a predicted softer consumer
spending during this quarter.
COST OF SALES AND GROSS MARGIN
Gross margin as a percentage of sales was approximately 13% in this quarter
of 2002 as compared to 15% for the same period in 2001. There was no
significant change in
cost of sales and gross margin in the two periods in comparison.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses during the six months ended
September 30, 2002 decreased by $11,000 as compared to the corresponding
period. Commission income decreased by $26,000 as compared to the
corresponding period. Operating expenses were in line with budgets and
comparable with the corresponding prior period.
INTEREST EXPENSE AND OTHER COSTS
Interest expense decreased by $36,000 as compared to the corresponding
six months in 2001, as a result of lower interest rates and reduction
in borrowing.
NET INCOME
The Company had an income of $312,000 for the six months ended September 30,
2002 compared to an income of $357,000 for the same quarter in 2001.
During the three months ended September 30, 2002, the Company had a profit
of $120,000 as a compared to a profit of $224,000 in 2001.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned -
thereunto duly authorized.
COSMO COMMUNICATIONS CORPORATION
Date: December 31, 2002
/s/Philip Lau
Chairman of the Board
/s/Carol Atkinson
Chief Financial Officer